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Commentary Last Updated: Nov 5th, 2007 - 00:48:50

Will Iran celebrate the 100th anniversary of discovering its black gold with $100 oil?
By Shirzad Azad
Online Journal Contributing Writer

Nov 5, 2007, 00:46

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Oil prices have surpassed a record US $95 a barrel. Given the growing geopolitical tensions in the Middle East involving an imminent war between the Turks and the Kurds over the future of oil-rich Kirkuk and the prospect of an independent Kurdish state, and the current standoff about Iran�s nuclear program, petroleum prices may cross over $100 a barrel in coming days.

Despite the indispensable role of the West, the United States in particular, in creating and escalating diverse tensions in the Middle East and the oil-suppliers of the Persian Gulf region, it is ironically the West itself which will be forced to suffer for the fuel price hike and the consequences of high-priced energy on the world economy.

Oil functions as the lifeblood of the global economy and any increase in petroleum prices causes serious effects and, in some cases, devastating pain on the economies in both developed and developing countries. Cheap oil has long been an important engine of rapid economic growth and development in the West and the East.

For instance, it was more than one and half decades ago when the American economist, Alan Freeman, pointed out that each $1 drop in the price of a barrel of petroleum transfers roughly $5 billion a year from Third World countries to North America, and the difference between oil at $20 and oil at $25 a barrel means the transfer of $70 to $100 billion from the poor and impoverished South to the rich and prosperous North. Considering the sharp rise in global oil consumption over the past decade, today these figures are no doubt even more astounding.

Regarding the new surge in petroleum prices, the West�s quandary over Iran�s nuclear issue is of paramount importance. For Iran, the nuclear program is simply a matter of national security aiming to counterbalance the country�s chronic energy shortage in the not too distant future. Any American uncalculated harsh policy and irrational behavior in bombing the country would obviously force the Iranians into defensive and retaliatory measures, ranging from the closure of the world�s oil throat, the Strait of Hormuz, to attacking oil tankers and possibly targeting major oil fields in the southern part of the Persian Gulf. Such a worse case scenario might cost the health of all oil-importing economies dearly.

The whole point about invading and occupying Iraq by the United States was about oil, the hidden and unspoken fact behind the West�s fuss over Iran�s nuclear program is also related to the issue of oil in one way to another.

What the West prefers is a weak and defenseless Iran, vulnerable to being bullied and conquered, such as what happened to Iraq in 2003. The West fears that an Iran equipped with nuclear technology may dash its hopes in classifying the country as another �Cakewalk� in Western geostrategic calculations and grand strategies.

Because of its location at the juncture of energy-rich Central Asia and the Persian Gulf with domination over the Strait of Hormuz, where the majority of tankers carrying Middle East oil pass through, Iran enjoys a very strategic location in the world. It is also a main obsession in all considerations of great powers with interests in the region. This makes sense why hardly any day passes without Iran being in the headlines.

Oil was first discovered in Iran in May 1908 and then in Iraq shortly after World War I. Three decades after Iran, in 1938 oil was also discovered in Saudi Arabia, the present largest petroleum producing country. Iran� current crude oil reserves are estimated at 137 billion barrels, or 11.6 percent of the world�s total reserves. At the same time, Iran has 29,000 billion cubic meters of natural gas, or 15.3 percent of total global reserves.

While oil prices are moving for higher, we have a couple of months left before Iran prepares to celebrate the 100th anniversary of its oil discovery. The continuation of current circumstances in the region only makes it predictable for the Iranians to have the epoch-making event of the oil discovery celebrated with $100 petroleum.

Where it comes to the Persian Gulf region, a quick glance at history reveals that oil prices are affected before key political developments. The longer the stalemate over Iran�s nuclear issue, the higher petroleum prices, and this, undoubtedly, is not good news for oil-thirsty economies. Hard policies or even a military option to settle the crisis will only make things worse and could make U.S. President George W. Bush�s prophecy about World War III come true.

Shirzad Azad is an East-West Asian Relations researcher at the Graduate School of International Politics, Economics and Communication, Aoyama Gakuin University, Tokyo.

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